Thursday, December 02, 2004

Hit #27

I have mentioned Ebookers (EBKR) in 2 earlier posts marking it as a target. Today, Cendant announced that it is acquiring Ebookers for around $12.38/share in an all-cash transaction.

This price is a very small ( < 10%) premium over yesterday's closing price, but a 40% premium over my average price of around $8.85/share.

I was pleasantly surprised to find that it was 40%, since I remember buying Ebookers at around $16/share. But as I averaged down, I ended up making the bulk of my purchase at around $5.2/share with the resulting average being the earlier cited $8.85/share.

With a takeover target on which you have strong confidence, averaging down is a must especially when the original undervalued state turns out to be just the beginning of a long slump!

It was revealed that Priceline was also in the running to buy Ebookers. I definitely think that Priceline will now go after Lastminute (LMIN) and a decent premium is possible even at the current price.